On national housing policy: He believes that although "homeownership is a very important national goal," federal policy is "imbalanced" -- overwhelmingly favoring single-family ownership over rental housing options, which tend to allow greater density and more-efficient land use.

Rather than attempting to limit federal tax breaks that are heavily skewed to ownership, Donovan would prefer to expand and improve FHA's apartment-financing programs and produce more rental housing options in general.

"One of the reasons" President Obama named him to this Cabinet post, Donovan said, was "to bring HUD's multifamily rental (programs) into the 21st century."

On tax issues, Donovan believes there are millions of potential buyers of houses who do not itemize deductions and would not now qualify for money-saving write-offs for mortgage interest and property taxes. In his view, they should receive some form of federal tax break, as proposed by Obama during his campaign.

Donovan also believes there has been a misperception about the administration's budget proposal to limit deductions for upper-income households earning $250,000 or more. This "wasn't targeted at the mortgage interest deduction," he said, but rather "was really about deductions more broadly," because taxpayers in higher brackets get far greater benefits for making charitable contributions or owning a home than households in the middle and lower brackets.

On FHA, Donovan is "absolutely concerned" by its explosive growth -- from less than a 3 percent market share during the boom years to more than 30 percent today. That sort of rapid expansion increases the potential for fraud and bad loans slipping through, which is why he is pressing congressional appropriations committees for long-delayed money to upgrade FHA's computer systems and monitoring ability, plus adding staff.

Given FHA's challenges, Donovan said he opposes reinstating the once-popular seller-financed "down-payment assistance" program, which allowed borrowers to obtain FHA-insured loans with no equity stakes. The Bush administration banned seller-financed down-payment assistance last year, citing high rates of early foreclosures and excessive losses. Home builders, realty brokers and some congressional Democrats want to resume the program, but Donovan said, "I think the decision that was made" to kill the program "was the right decision."